May 23, 2009|
An unprecedented week...
Without a doubt, the Indian indices were the top gainers amongst their global peers during the last week. The country's benchmark index, the BSE-Sensex ended higher by 14% over the previous week. It may be noted that this is the steepest weekly gain since March 1992. Other Asian markets ended the week on a mixed note with Singapore (up 5%) and Hong Kong (up 2%) ending higher, while Japan (down 0.4%) and China (down 2%) ending the week on a negative note. As for other global markets, Germany (up 4%), Brazil (up 3%), France (up 2%), UK (up 0.4%) and US (up 0.1%) ended the week on a firm note.
Coming to the performance of sectoral indices in India, stocks forming part of the realty, capital goods and consumer durables spaces emerged as the top gainers during the week. The BSE-Realty and BSE-Capital Goods indices recorded massive gains of 38% and 28% respectively. On the other hand, stocks from the IT, FMCG and healthcare spaces missed out on the party. While stocks forming part of the IT index were hit due to the strong appreciation of the rupee against the dollar, stocks forming part of the FMCG and healthcare sectors were not in favour as investors chose to pour in money in sectors that had been badly hit over the past year. The BSE-IT index ended lower by 2%, while the BSE-FMCG and BSE-Healthcare indices recorded gains of 1% and 7% respectively. The BSE-Small cap and BSE-Midcap indices also recorded strong gains during the week, ending higher by 29% and 25% respectively.
Data stating the institutional activity shows that there was mixed action between domestic mutual funds and FIIs (foreign institutional investors) during the week gone by. While FIIs invested nearly Rs 60 bn during the week (Rs 57 bn last week), the domestic mutual funds booked profits as they pulled out Rs 14 bn during the week barring Friday (data for Friday was not available at the time of writing).
May 18 2009, was a manic Monday, a historical day for the Indian markets. Cheering the fact that the UPA government came back into power, the stock market went berserk as the BSE-Sensex closed with gains of around 2,100 points. Frontline blue-chip stocks such as L&T, DLF, ICICI Bank, Unitech, Bharti Airtel, amongst other recorded massive gains of above 20% each. And this too within a matter of seconds! The markets were halted as the indices crossed the 20% gain mark (as per the rule set by the stock exchanges).
Coming to the performance of India Inc., Bajaj Auto announced its FY09 results during the week. The company reported a 3% YoY decline in net sales on account of lower growth in sales volumes in the domestic market. The company reported a 2% YoY decline in two wheeler sales (volumes), while its three wheelers volume sales dropped by at 5% YoY. However, the company did perform well in its exports segment not only in terms of volumes but also in terms of realisations. Total export volumes were higher by 25% YoY and export revenues reported a growth of 29% YoY. On the profitability front, the company registered a decline of 13% YoY. ITC also announced its results during the week. While the company's revenues grew by 10% YoY, it recorded a profit growth of 5% YoY. Revenue increase was largely due to growth in its cigarette, FMCG and paper division businesses. The operating margins remain stable at 32% during FY09. ITC's profit growth was impacted by a strong increase in interest costs and depreciation charges.
In other news, a leading business daily reported that IT major, Infosys is looking at various acquisition opportunities in the healthcare and lifestyle segments in the range of US$ 200 m to US$ 300 m. The company is looking at geographies like Germany, France and Japan for the acquisitions. The company's current cash and bank balance stands at around US$ 1.9 bn. As such, funds are not a constraint. Given the bleak outlook in the BFSI (banking financial services and insurance) and manufacturing sectors, which account for around 34% and 20% of the company's revenues respectively, the company is keen to diversify into segments which are immune to the global economic slowdown.
|Source: Yahoo Finance
||Source: Yahoo Finance
Movers and shakers during the week
||Change from 52-wk High
|Top gainers during the week (BSE-A Group)
||64 / 15
||1,850 / 404
||624 / 63
||126 / 29
||28,350 / 9,125
|Top losers during the week (BSE-A Group)
||1,230 / 930
||1,991 / 1,040
||252 / 146
||532 / 182
||1,028 / 418
Inflation (as measured by the WPI) increased to 0.61% for the week ended May 9. It may be noted that the wholesale price index has been steadily rising for the past four consecutive weeks now. The inflation rate is inching upwards on the back of rising prices of essential food articles such as cereals, fruits & vegetables, tea and spices. Further, the Centre for Monitoring Indian Economy (CMIE) in its latest publication has stated that it expects the WPI inflation rate to remain at 0.1% during FY10. It has predicted that the price of fuel products and manufactured goods are set to fall during the year, while those of primary articles will remain higher. In addition, it has projected that a lower money supply growth and an increase in capacity expansions during FY10 will keep inflation at a lower level. It may be noted that inflation stood at about 8.3% for FY09.
In economic news, a leading business daily reported that the government is mulling over freeing fuel prices from its control and instead linking them to international prices if the draft cabinet note of the oil ministry is implemented. The immediate effect will be that petrol prices will be raised by Rs 2, while diesel prices will go down by Rs 0.3. However, the note mentions that the government will reserve its right of stepping in if crude oil prices breach the US$ 75 per barrel mark. In our opinion, it makes sense to decontrol prices now at a time when input costs i.e. crude oil prices can be passed on. However, we do not expect the government to let end user prices go up beyond a point, given the resentment it causes in the general public.
In international news, President Barack Obama recently signed credit card reforms into law, aiming to shield consumers from high fees and rate hikes. According to the President, "Credit card debt is easily a one-way street. It is easy to get in, but almost impossible to get out". This effort by the government has been made to help consumers beat the effects of the economic downturn. It is believed that this will disallow rate increases on existing balances unless consumers delay bill payment by at least 60 days. In the case of the initial rate being a promotional rate which has expired, a 45 days' notice to raise rates should be given to a customer.
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